U.S. multinational corporations are highly correlated with United States financial markets and therefore do not reduce portfolio risk to the same extent as investing in foreign corporations.

Question

Quizplus · Accepted Answer

U.S. multinational corporations are highly correlated with United States financial markets because they tend to operate mostly in the U.S. and often have significant exposure to the U.S. economy. This means that their stock prices tend to move up and down in conjunction with the broader U.S. stock market. Therefore, investing in U.S. multinational corporations may not provide the same level of diversification benefits as investing in foreign corporations, which are likely to have lower correlation with U.S. financial markets.

US Multinational Corporations Are Highly Correlated with United States Financial